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Simard Publishes Critique of Cy Pres Distributions in USC Law Review

October 9, 2015

Professor Linda Simard published a paper critiquing judicial
determinations of cy pres distributions
in the University of Southern California Law Review. See Linda Sandstrom
Simard, “Fair Reasonable and Adequate”
According to Who? Cy Pres Distributions that Result in Cheap Settlements and
Generous attorney Fees, But No Financial Benefit to Class Members, 88 S.
CAL. L. REV. 55 (2015). An abstract of Professor Simard’s article and a link to
her paper on SSRN appears below.
In her recent article, Professor Rhonda
Wasserman argues that class action settlements that distribute funds cy pres
raise a very serious risk of prejudice to absent class members. The problem,
she asserts, is the temptation for class counsel to sell out the interests of
absent class members in exchange for a discounted settlement for the defendant
and a generous fee for class counsel. To
illustrate her concern, she cites the $9.5 million settlement in Lane v.
Facebook that directed approximately $6.5 million to a nascent charity that was
controlled -- at least partially -- by the defendant, $3 million to class
counsel and nothing to the 3 million absent class members. Professor Wasserman argues that courts
cannot have a laissez faire attitude toward protecting absent class members and
she proposes a number of procedural reforms to ensure that cy pres
distributions are only used when absolutely necessary. While her proposals are
likely to provoke increased judicial scrutiny of cy pres distributions, the
article stops short of addressing the principal question: when, if ever, is a settlement that
distributes funds cy pres “fair, reasonable and adequate” to the absent class
members? This Response addresses the
principal question omitted from Professor Wasserman’s article and asserts that
representations of counsel who are aligned in support of a proposed agreement
and stand to gain from its approval are insufficient to find a proposed
settlement agreement “fair, reasonable, and adequate.” Rather, Rule 23(e) demands that courts base a
fairness finding upon objectively reliable evidence and this Response offers a
proposal how district courts may acquire such evidence. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2588063